Can a Lien Be Put on a House Before Foreclosure?

Homeowners defaulting on their mortgages enter what's called "preforeclosure." When your home is in preforeclosure it's moving towards actual foreclosure and sale but hasn't yet been foreclosed, meaning you still own it. In fact, you own your home right up until its foreclosure sale, when a new owner -- possibly your lender -- buys it. Because your home belongs to you up until it's foreclosed, your creditors may still record liens against it prior to that event.

Foreclosure and Ownership

When a mortgage lender is foreclosing you it's trying to end your mortgage loan. Also, a mortgage's foreclosure allows the mortgage lender to repossess the home that is acting as security for the loan the lender made to the homeowner. However, even homeowners being foreclosed -- but not yet actually foreclosed -- retain property title rights to their homes. Along with property title rights, though, come creditors' rights to attach liens to the properties of their debtors.

Creditor Property Liens

Creditors frequently care little when their debtors' homes are being foreclosed because they just want to be paid. If your home is scheduled for foreclosure in two weeks, a creditor of yours might try to record a lien against it prior to that date. Property liens go with the property and not with the property's owners. In other words, any liens recorded against your home prior to its foreclosure could in some cases become the new owners' responsibility.

Post-Foreclosure Judgments

Creditors attach liens to homes for various reasons, including for potential future deficiency judgment reasons. When homes are sold, liens on their titles are paid off by seniority, or recording date, meaning first mortgages are usually paid off first. Chances are good a foreclosed home's sale proceeds will leave little to be paid to any junior lienholders, effectively eliminating those liens. However, even property liens eliminated in foreclosure are subject to court-ordered deficiency judgments allowing their lienholders to garnish the foreclosed owners' wages.

Unsecured Debt Liens

When a home is foreclosed, some types of liens not paid off in the foreclosure and also eliminated by it can become unsecured debt. Typically, unsecured debt includes credit card debt or any "signature loans." Unsecured debt lienholders that manage to place liens on a preforeclosed home could use post-foreclosure deficiency judgments to collect. However, it's expensive to seek property liens as well as post-foreclosure deficiency judgments, meaning creditors might just write off such debt.

About the Author

Tony Guerra served more than 20 years in the U.S. Navy. He also spent seven years as an airline operations manager. Guerra is a former realtor, real-estate salesperson, associate broker and real-estate education instructor. He holds a master's degree in management and a bachelor's degree in interdisciplinary studies.